The cost of a bad hire, and how to avoid it

Of all the benefits to having a solid, proven hiring process at your business, the greatest is this: Hiring the wrong person can cost your business thousands of dollars and have ramifications that echo far beyond that single bad hire.

It’s a scenario many business owners can relate to. You have a short amount of time to hire someone for a critical role in your company, so you post a basic job description on a few job boards, review a bunch of résumés and hold a handful of interviews, deciding quickly on who you feel could fit the position well.

Six months later, it’s apparent it was the wrong decision, and your new employee leaves or is fired. You may have known they were wrong for the job within a few weeks, but hoped things would change.

The cost of such a mistake often is tens of thousands of dollars. It could cost up to five times a bad hire’s annual salary, according to a study by the Society for Human Resources Management (SHRM). SHRM also found that the higher the person’s position and the longer they remain in that position, the more it will cost to replace them.

What drives these costs so high? Hiring a new employee brings with it the cost of training and orientation, testing, termination costs such as COBRA and unemployment — and the cost of repeating the process all over again. Unfortunately, this doesn’t even begin to touch on the unintended consequences of a bad hire.

Seeing things go wrong probably affected your other employees, who now may be wondering if they should start looking for a new job as well. They may be questioning your decision making and judgment skills, especially if they felt the new employee was wrong for the job.

Stephanie Klein, president and CEO of Experience Factor, a Denver staffing and placement firm, and chair of the Denver Workforce Investment Board, can be reached at 303-300-6976 or stephanie@experiencefactor.com.